Big ETF Trends for 2025: Single stocks, sectors and asset flows!

you're watching ETF guide I'm Ronda legi great to see you again and if you're here for the first time welcome aboard be sure to hit that subscribe button we've got a lot of brand new original series programs that are just beginning a new season for 2025 from ETF battles to First Look ETF and shifting energy so be sure to uh hit that subscribe button and also turn on notifications so that when we drop those new episodes you'll be the first to know about it so take it look at the ETF Marketplace for 2025 as it begins to take shape uh we've got Mike Akens with ETF action joining us to give us some perspective on H what he sees in the ETF Marketplace Mike great to see you great to be here Ron excited to talk about the ETF space it's uh Ever Changing yeah and it was a historical year on many fronts in 20124 we saw a lot of big Milestones of course we saw the first group of uh cryptocurrency and Bitcoin linked spot Bitcoin linked spot price Bitcoin linked ETFs so that was a a certainly a turning point for the ETF industry and C certainly sets a table for more to come I want to start out though talking about U you know industry sectors as you know Mike I mean sector ETFs are one of the biggest and maybe most popular categories within the ETF Marketplace and we're starting to already see some sector rotation within the S&P 500 Industry Group so tell us what you're seeing yeah you know I think what's great about the ETF Market as a whole is it's got so large and so mature that it really is can be create can be used as a guide to what's happening within the markets across almost any sector region country sectors being one of the oldest one of the most sure um I just went into our Equity sector and Industry dashboard which is completely free at ETF action.com and I'll just kind of use this is a guide but as we can see here you know the sector ETF Market is $747 billion um with technology broken out what's interesting I think is if you open up the sector Marketplace and look at the breakdown what you'll find is that the assets actually tie out quite nicely to the S&P 500 so even though these are designed to get allocations directly into a particular sector to overweight underrate more of a tactical tool if you will um what what it tends to happen is these sectors end up looking a lot like the total allocation of assets end up looking a lot like the S&P 500 or the broader Market as a whole as you can see technology um financials is a little higher than normal right now which we'll get into um but I think the key here the key point to realize is that it's matured and you can see that mature here if I switch to kind of our annual breakdown and look at since Inception obviously you kind of had the growth you know in the mid 2000s of the ETF vehicle as itself but it's kind of plateaued a little bit and that plateauing really is a sense of that maturity and allows us to then understand ETF flows in terms of Market sentiment so what I would like to do is just kind of kind of focus in on ETF flows but be flows by the grouped up by sector but before I do that um it's really important here to point out that flows in my opinion are generally um indicative of past returns um not so much future returns right so a lot of folks like to focus like there's a lot of money going into financials I should get into financials or a lot of what ain't going into technology I should get in technology and there's really no evidence from a return basis that those flows are predictive of future returns in fact if there is any evidence one could argue that it's almost if you see too much flows go to one category it's time to start playing contrarian um if you just look at that from a p return basis but that being said um just going to set this on a different time frame here I set this to monthly just so we can see what's gone on over the last year in this space so what I'm looking at right now is this chart is flows across the 11 G sectors so all ETFs in those sectors and flows on a monthly basis over the last year I'll just kind of go through it and what we'll see is Industrials have been all over the place right there's been no clear uh dominance you know you've got several up months every down months but by and large not a lot going on in this space um just uh pretty much neutral if you will in terms of flow um looking at real estate you know there's been a lot more down months um uh recently you can see the last three months net outflows in the real estate space um a big part of that obviously the macro story around rates what's happening with mortgage rates things of that nature but also with commercial real estate and having to reset some of that Bae um you're seeing I think some of that play out and flows oh by the way by the way we have a real estate ETF battle coming up you and with Tony uh Tony Dong over at ETF Central so for our audience stay put and stay alert because we've got a re ETF battle coming yes indeed it's a good one it's a good one so yeah healthc care has probably been one of the biggest outflows um across the board you can see every month except for three over the past 12 months has been outflows significant net outflows in that space um a lot going on there you know I was going to ask you what about defensive sectors you know if you look at for example like Consumer Staples utilities I mean how have some of these def more defensive industry groups been doing we know that offense like communication Services as well as technology if we can categorize those as offensive offensive Focus categories have been doing well but how have the defensive categories do you think maybe those will start to maybe pick up and catch up to some of those offensive Focus categories you know it you usually need some sort of uh Catalyst in terms of returns right so if you look at your defensive sectors they're significantly trailing um your more uh cyclical and uh growth oriented sectors the market and as such um you know you you haven't seen a lot of flows come into these strategies Tally what you tend to see is when the market gets very volatile um or if we're having a we're in the midst of a big correction um people Park assets into the more defensive sectors and you'll start seeing those those um flows really increase but as you can tell looking at Consumer Staples which I have highlighted right now there hasn't been a whole lot of activity going at all on at all right we've been on a bull market so there's been a little bit of inflow a little bit of outflow but historically what you'll see is uh these more defensive sectors will get uh heavy on the inflows when people are looking to stay invested but maybe in a little less riskier of investment and that's when you see those defensive sectors pick up and flows whereas this past year it's been technology right technology has been the Big Driver inflows in every month except for two large um net inflows across the board into technology uh consumer uh communication Services has been pretty flat um though I would say we're see in the last few months we're seeing a little bit more FL clows go into this space um obviously that's space is dominated by a handful of names um meta Google um so forth but you know pretty pretty quiet space really the total story of the sector space you know over the past year if we look at this in chart format I can show it a little bit better slide over here to flows look at the past year you know there's been 24 24 billion dollars have come into sectors over a 100% of that is techn ol right so basically take technology out of it and you've had net outflows across the other 10 sectors I think that's really the story now financials has really come on strong so see eight and a half billion dollars a lot of folks are you know thinking that financials are going to get a reprieve with the new Trump Administration um a lot of breakdown some of those regulatory oversights plus you're starting to see um well you're seeing it this week in the bank earnings but that net interest income is really starting to hit home with with investors understanding um the fact that we we're in a new rate environment and that banks are are actually earning money on all those deposits again but this has been the only other outlier I would say in terms of positive recently everything else has been pretty neutral with the exception of that that technology and that's the big story right without technology ETFs every other ETF in the aggregate grouped up would be negative outflows over the past year all the other sectors you're saying combined yep wow so you can see that's a that's an amazing stat wow that's just incredible yep it's it's really just been a do dominating theme across our markets not just for the past year but really over the past year it's been Amplified yeah now you had mentioned uh interest rates uh and we know that bond yields have been rising despite the fed's recent rate Cuts uh Bond ETFs of course are mostly down we know that's inverse relationship right when Bond uh when bond yields go up prices come down and vice versa so what what are you seeing with the bond ETFs uh trend-wise yeah you know it's it's interesting I mean first and foremost what we're seeing within the bond market is it's becoming the the bond ETF Market is becoming the deao place to go for investors just like the equity ETFs did over the past decade um you know folks are really leaning into it so just the growth of the bond Market if you look at it first we'll go to our asset class category page to illustrate this this is if I look at the chart on our asset classes and categories it's going to provide a breakdown of the entire ETF Market at the highest level we classify ETFs which is the asset class level right and so first take note you know 77% Equity ETFs 177% fixed income so still dominated by Equity but in terms of of what does that look like over the you know since the Inception of ETFs what you've seen over the past you know seven to 10 years is a continued adoption of fixed income ETFs becoming a bigger part of those those overall allocations and we can see that not only in AUM but if we look at flows going back over the past 10 years you keep seeing over the last five years fixed income ETFs taking a bigger bite of the pie and that's just a sense of maturity folks are realizing hey just like ETFs did to the equity Market making it more efficient easier to trade easier to allocate the same thing is possible with the fixed income ETFs and that's playing out now in terms of where is it going within the fixed income markets I head over to our fixed income ETF dashboard reminder these are 100% free you can do a lot more if you create an account but if you're just looking to see and navigate the the markets these dashboards are just SC out ETF action.com and you can play around with them completely for free and see some of these Trends but first and foremost we got that $1.8 trillion fixed income Market most of it is in taxable ETFs um with about 137 billion in Municipal if we focus in on that taxable space and find is not surprisingly um you know Lion Share is in that fixed income taxable core I would point out the ultra short category at 255 billion think of this is like a cash substitute this is everything you know less than onee maturity mostly dominated by government securities um it's an ultra short category so you're really getting most of these strategies you've got a mix of active and passive but generally you're kind of Benchmark is that three-month treasury right t- bill um type return and it's it's an it's an area where you can park your Park your cash when you're not sure where you want to allocate to but point being is there's a lot of different categories here and I think maybe to your point one of the things we can look at is if we look at returns over the past year right we're going to see converts everything that's got the most equity-like characteristics the highest correlation the highest risk done the best right so convertibles best performer bank loans preferred stocks these are going to be your sectors of the your more higher risk sectors of the fixed income ETF space um and in return we had a very bullish market last year they're going to be your top performers but if we go down to the bottom what we're going to start seeing right is anything with long-term in it and anything with higher duration is going to have your worst performers right so despite the FED starting to cut in the second half of last year the markets you know took a different opinion on that right and and the FED can kind of set that um that policy rate but the markets can can argue um whether they agree or disagree and what we've seen with the bare steepening in the market is that your longer term strategies and really Dive Right into those long terms and look at some of them um from a return basis what you're going to see is you know ice shares 25 plus years PCO 25 plus years you got crush in this space right if you were on the long into of the curve over the last year it's been a tough ride um it's been even tougher even tougher if we've gone over a longer period right so let's just take a look at that um you know uh longer duration one of these longer duration ETFs um we'll look at the um Vanguard extended duration ETF edv yeah we'll pull it up the performance you know and over the last three years it's been tough ride oh for sure in 2022 a lot of people were expecting you know bonds to be a place of safety and they weren't Y and some of these places that you're mentioning were among the hardest hit and so I think investors still have that on their their mind the ones at least that remember a lot of them have uh Amnesia and have forgotten already but I think uh you know it certainly has um I think brought some investors to light and they've realized that hey there is duration risk when you're going extending that duration over the long you know 20 plus years yeah and you know if we take this up what we could do is we could just isolate um our treasury um ETFs so if I come in here and show you from a flows perspective um I think of kind of the duration into the fixed income Market a lot like the sectors and equities you can really see that that volatility of flows based on macro assumptions those tactical moves so I'm going to do is I'm going to set up my dashboard here um to be just fixed income and I'm just going to go in just taxable I'm also going to set a filter then at this point on just um the government uh ETFs so I want to look at the long and the short I'm going to hit apply and now what we can do so I'll get rid of that composite and we can see okay here's your government long government short right right and what we mean by long and short by the way for those watching we're talking about maturities long-term maturities and short-term maturities not long as in Long leveraged or short short leverage so excellent point yeah just purely talking about duration right long is going to be extended seven years plus out I'm sorry 10 years plus out intermediates typically thought of as 3 to7 uh short is 1 to three and Ultra short is under a year so I'm just going to look at short and long we're going to get rid of the ultra short because that can be thought of as a cash like it can be a little confusing we'll just keep it to the allocators that are going short short in the curve long on the curve and let's just take a look at what's happened over the past couple of years in this space so I'm going to go into my charts here I'm going to look at it by category we can see right now 65% of those government ETFs are in Long 35% are in short and if we slide down I'm going to set this up quarterly to give us a little more representation but if we look at the flows what you see is that people were anticipating rates coming down and as a result over the last year kind of you know last few years a lot of money went to the long end of the curve and that has proven to be not a great deal right and then we see we're kind of rolling in in December there's kind of a little capitulation we saw some of the largest outflows ever in the fourth quarter so I have this setup as quarterly flows right now so in the fourth quarter you saw a huge outflow right it's the first outflow over the last three years on a quarterly basis for the long end of the curve using just those treasury ETFs and I think that's a little bit of a cap capitulation saying you know what um we were trying to play the fed the Fed was telling us they were lowering lowering rates lowering rates drive down interest rates which would be positive for longer duration but the market had something else in mind and we've seen that bear steepening and as a result you're seeing a little bit of that capitulation and flows and this would also just kind of be an example of well now that you're seeing outflows come out now I might actually want to start dappling right indicator said before yeah and that's just a little you know definitely not making that call but just something to look at if I break it down monthly it even gets a little bit Wilder but so now I'm going to look at monthly flows right and what you've seen is there was just basically this big call on the long end of the curve shorts a little bit more all over the place we can see a lot of outflows but on the long end of the curve this is over the last three years you're pretty much looking at people getting you know longer and longer um dated ETF Bond government uh treasury bond ETFs in their portfolios and then a little bit of a capitulation you know what we got it wrong we got hurt and we've seen you know November and December two of the largest outflows and I think that them in fact I'm pretty certain um minus what you saw during covid little bit of the taper tantrum yep you know you have two of your largest monthly out close in the history of this category in November and December of 2024 yeah another contrarian indicator for you Traders paying attention and trading that way take note one last thing Mike before you take off let's talk about single stock ETFs just quickly as you know this is a relatively new ETF category that has seen strong investor interest we've see that that in the trading volume it's also reflected in the asset assets under management growth um could we uh what are you what else are you seeing here in this particular Market yeah so I mean part of what we're seeing is the ET ET fication of the market in general right like if I can put it in ETF I'm going to I could get into that about the crypto world for a while if I wanted to but sticking to single stocks it's been pretty interesting phenomenon um give me one second I'll set up my my picture here yeah and while you're and while you're doing that I'm just going to mention that when single stock ETFs first came out I think we saw the first iteration oh gosh was it 2023 I think it was either 2023 or 2022 but the the years are blending together but when this first came out I was I had some I had some doubts I think like a lot of people like what are they doing how are they going to use these these uh products and you know what what is going to be the reaction of the the marketplace is there going to be interest is there going to be demand for this or is that interest going to be just limited to let's say a shareholder group that's just interested in let's say Tesla or you know other single stocks and I I gotta say uh I've been you know pleasantly surprised that this particular category is really uh hit a hit a note with Traders and investors yeah I I I totally agree um it's it's impressive like if we stop and just ask ourselves like why you know why is this happening there's really two categories within the single stock I broke it down for you here but we can see there's $27 billion you 18 billion of that 18.2 is in leverage inverse stocks if you look at the lever it's dominantly 11 to1 lever over inverse and um and then if you look at the other side of it it's the synthetic income writing covered calls on a single stock to generate um high levels of income on very very volatile stocks um so first and foremost the strategies the the stocks that have gotten the most growth tend to be those with the most volatility right the tech tech uh focused sectors so if I open this up Nvidia Tesla micro strategy right these are huge um you know billion dooll single stock ETFs the rationale is not hard for me to get get into right if you're a individual investor and you want to trade leverage on names right you you're it's very risky um I'll tell you there's not very many winners over the Long Haul but if you're looking for that exposure um you know traditionally you'd have to get a margin account and you'd have to do this either through Futures Market or through some sort of Leverage at your brokerage account then that comes with a whole level of margin calls this that and the other um and sleepless nights yeah if you do it through the ETF you know you are getting a single exposure you buy 100,000 shares of this or $100,000 worth of one of these um single stock ETFs you know it may go down 60% in day right gets you two times the the uh exposure of something that has a horrible day like micro strategy as an example just to give you a sense of how crazy this can become this is the return of micro strage leverage versus micro strategy right so you can just see how quickly it goes right right out of the gates it got up to 96% and then you know it's come back down to life um relative but still over the long course now what I'll tell you if you look at flows in this you can see that almost all the flows into this strategy came at the height when it was up 900% so a lot of the people that bought into this bought in late not everybody is is sitting on a big pile of money just because the strategy's up so much um but in general um there is definitely an appetite for the space right we can see it big um if you look at the growth grow of this space is pretty impressive um over the last couple of years at that at 26 billion um I get it it provides transparency I just you know remind the audience that these things are um they're designed to be used for short-term trades they're not designed to be used as like buy and forget it um and if you look at the flows in the space it's active but it's predominantly on the inflow side so far and we're not not seen a lot of people taking their gains and you know long term I'm not sure we will hit bouts of volatility and the names that are being levered um tend to be the more volatile names because provides the most bang for your buck right there's there's more excitement there um I don't want to call it gamification but there is a little bit of that gambling aspect to what's going on with these single stock ETFs yeah and you also have the flip side of the trade which is the inverse uh I know that uh you know for example companies like Direction offer inverse versions of these same single stock ETFs so uh those of of of the the you know investment audience or or traders that want to play that side of the market they can whether that's hedging an existing position I guess that's another use case for these types of ETFs if you have a huge position on the long side in a in a Tesla or or Nvidia maybe you're trying to protect some or all of that I guess you could use an inverse single stock ETF attached to that same stock to offset any potential losses this is the market share of levered versus inverse single stock wow 96% are in the levered vehicles out of that $18 billion 4.3% are in the inverse that's pretty contrarian right there I don't know that I don't know that I would step in front of that freight train but it's it's it's uh it's it's definitely very contrarian when you think about it but I've always said that with these products any sort of Leverage product you want first of all a market whatever you're trading in whatever Direction it is especially if you're using leverage that market has to be trending strongly in the same direction that you're trading in um before I would even touch it so that's you know you definitely have to make sure that that's the kind of condition you're in before you would you know touch that again that's not to say the trend can't suddenly change on you but it's certainly I think a step in the right direction if you're trading this Mike uh great stuff I I really uh am appreciative that you are showcasing some of the trends that you see in the ETF Marketplace and then uh again if you just want to mention to our audience uh a little bit more about ETF action and how they could take advantage of uh this this excellent tool that you've shown us yeah so appreciate Time Dr Ron always love talking ETF markets with you um for your audience if you're looking for a resource out there now ETF action uh serves a number of different communities um we have a number of different ways interact with our platform first and foremost for your audience you can interact with it free right so if you go to ETF action.com play around our dashboards for free but if you want create an account so if you were to come out to ETF action create a free account no credit card required and we give a give away a numerous amount of data and tools um our more we have a number of subscription packages you can take advantage of if you're looking for our premium data sets that we license from fax set um but mostly as a firm you know we work with the institutional Community um building out model marketplaces building out uh you know showcase channels for issuers in the market place but you know on a on a broader base we have a large community of financial advisers do-it-yourself investors that are taking advantage of our tools really to navigate the marketplace um you know a big part of using the ETF Marketplace places being able to efficiently navigate to the right channels that align with your macro assumptions and to me I've been in this game now for 20 years I've you know I led a a large siiz ETF issuers um ETF uh group for a number of years and part of launching ETF action is I think of the markets through the lens of ETFs because they are so incredibly efficient and I hope that your audience will think the same way and maybe they can use our platform to help them along with that Journey 100% well we appreciate having you on uh for those you watching again go to ETF action.com you can also hit the description section below this video for links to that and uh Mike keep up the good work and we'll see you soon awesome Ron thanks for having me today well hope you enjoyed today's uh episode uh hit the comment section below and uh those of you that are more data focused well I think you certainly appreciate uh what we shared with you on on today's episode so again thanks for watching I'm Ronda legi with ETF Guide TV we'll see you on the next episode